Sunday, February 24, 2013

Bitcoin

For Bitcoin to work as a currency, its value against USD has to keep rising since there's so much less of it. In a perfect world, one Satoshi might equal one US mil (1/10th cent)

If that ever happened, 1 BTC would equal 100,000 USD

It won't ever get that high, but that example shows you why it has to increase to work

From now until some time in 2016, the block reward is 25 BTC. One block is solved on average every 10 minutes. Every 2016 blocks, the network self-adjusts block difficulty based on the current network hashrate to keep this average intact.The 25 coin difficulty was pre-built in. Every 210,000 (?) blocks, the block reward halves, until it eventually goes to 0 once 21 million coins exist.So was difficulty but the difficulty didn't react quickly enough for fpga's hence why we will have an ASIC armageddon if they are real, because the diff adjust will not let the system spiral out of control but wasn't resistant or quick enough to combat exponential hashrate increases so it went all bonkers.

So, for the next few years, 25 BTC is mined every 10 minutes. That ends up being 1,134,000 BTC/year

So it doesn't matter what the network hashrate is, that's the maximum BTC to be divided up annually among all the miners.

Network hashrate matters for time it takes to get to the next drop, just not directly related

So Butterfly Labs has done almost 20,000 pre-orders, and they're bound to do a few hundred more orders once they actually ship. Now let's imagine that they're the ONLY company on the market, and that every GPU miner just ups and quits once the network is saturated with ASICs.

Let's also imagine that those 20,000 BFL ASICs hash at equal speeds.

That would mean that each miner could only get 65.7 BTC of the 1,314,000 BTC available per year.

Now, the problem with that example is that every ASIC isn't equally powered, and they're NOT the only company on the market, and a lot of GPU miners are actually in it for the network philosophy and not just for the money.

Anyway, you see the ASIC dilemma.... in an ideal situation, each ASIC is going to bring you 65 BTC/year. But it's probably not going to be an ideal situation.